An electrohydrodynamic atomization (EHDA) system that generates an electrospray can achieve particle formation and encapsulation by accumulating an electric charge on liquid flowing out from the nozzle. A novel coaxial EHDA system for continuous fabrication of water-stable magnetic nanoparticles (MNPs) is established, based on a cone-jet mode of electrospraying. Systemic variables, such as flow rates from dual nozzles and inducing voltages, are controlled to enable the preparation of water-soluble MNPs coated by polysorbate 80. The PEGylated MNPs exhibit water stability. The magnetic resonance imaging potential of these MNPs is confirmed by in vivo imaging using a gastric cancer xenograft mouse model. Thus, this advanced coaxial EHDA system demonstrates remarkable capabilities for the continuous encapsulation of MNPs to render them water-stable while preserving their properties as imaging agents.